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Active Promotion of a People-Centric New Southbound Policy

By Lee

After taking office, the new government actively set out to create core values of innovation, employment and allocation, strive to build a new economic model based on sustainable development and expand the structure and diversity of the external economy to wave goodbye to our past dependence on a single market. The New Southbound Policy based on this type of spirit will be initiated with the hope of making ASEAN into an extension of Taiwan’s domestic market.    
 
The Lee Teng-hui and Chen Shui-bian administrations were no strangers to southbound policy. A Southbound Policy Paper was issued by the government in 1993. Policy Guidelines for Strengthening Economic and Trade Work in the Southeast Asia Region was released the following year. In 2002, Chen Shui-bian announced the re-initiation of the Southbound Policy to strengthen support and assistance for Southeast Asian investment and seek out opportunities to sign free trade agreements. 
 
Some people believe that this third phase of Taiwan’s Southbound Policy will not succeed because many Taiwanese businesses have been leaving Southeast Asia and investing in factories in China. However, there are still quite a few cases of businesses that are steadfast about remaining in ASEAN countries. As the new government develops a new Southbound Policy, these Taiwanese businesses shall play a role in local policy lobbying and market information collection.   
 
Looking at the policy from a positive angle, new strategies must be sought out for the New Southbound Policy but the difficulties that Taiwan currently faces with economic transformation must also be acknowledged. Taiwan should not always be restricted by the attitudes of China. The positioning and strategies for the New Southbound Policy must be considered from the grand strategy for the overall future economy of Taiwan.   
 
Compared to the previous phase of the Southbound Policy which mainly encouraged investment by Taiwan businesses and establishment of overseas production bases for lowering costs, the New Southbound Policy places its emphasis on a people-centric, new economic strategy. Another element is bilateralism including mutual investment, reciprocal tourism and mutual training of personnel to strengthen relations with ASEAN countries and India and to enable the entire Asian region to form a closely-connected economy. 
 
The New Southbound Policy includes talent cultivation, participation in infrastructure construction, attracting investment and tourism promotion to broaden the focus from single-sided outward investment by Taiwan  to bilateral exchanges between Taiwan and ASEAN and expanding from the economic realm to a more diversified economic partnership,   
 
Established in 1967, ASEAN is comprised of ten countries including Singapore, Malaysia, Thailand, the Philippines, Indonesia, Brunei, Vietnam, Laos, Burma and Cambodia.  The population of ASEAN countries exceeds 600 million. Based on 2014 trade statistics, there are six countries in ASEAN which are ranked among Taiwan’s top 20 external trade partners. Based on its geographic location, Taiwan also has advantages over Japan and Korea.  
 
Another point worth mentioning is the New Southbound Policy not only focused on the ten countries in ASEAN, but also India, Sri Lanka, Bangladesh, Nepal, Bhutan and Pakistan. The population of these 16 countries is almost two billion people which makes up one-third of the world population which is a very significant market.  
 
After May 20th, the Office of the President established the New Southbound Policy Office with inter-ministerial coordination abilities headed by former Minister of Foreign Affairs James Huang. He came up with a PMI concept for the New Southbound Policy so the government can provide assistance to Taiwan businesses entering the ASEAN and India markets from the vantage point of people, money and information. 
 
People are a critical element for the New Southbound Policy. Since there are not many people in Taiwan who understand Southeast Asia and bilateral exchanges are limited, the new government is not only planning think tanks and hiring experts to offer recommendations, scholarships are being budgeted by the Ministry of Education and short-term technical training programs are being launched to allow Taiwanese people to learn about Southeast Asian languages and culture and also let Southeast Asian people and students to come to Taiwan for study. 
 
With regard to money, financial support for southbound Taiwanese businesses currently includes the Export-Import Bank of the ROC, Small and Medium Business Credit Guarantee Fund and OCAC Overseas Guarantee. The main source of business financing is the Export-Import Bank of the ROC which has only one-tenth the capitalization of the Bank of Korea and is incapable of supporting Taiwanese businesses. Next year, the government will raise the capitalization from NT$12 billion to NT$36 billion giving the bank more ammunition to use. 
 
With regard to information, the government will bring together governmental and quasi-governmental agencies such as the Institute for Information Industry, the Industrial Technology Research Institute and various think tanks to provide better business and market information, offer more investment channels and even introduce the culture and customs of countries in order to assist businesses into entering ASEAN markets. 
 
Compared to the fast development of ASEAN, the New Southbound Policy of Taiwan is slightly later than other countries including China’s One Belt and One Road and Asian Infrastructure Investment Bank which are focused on ASEAN. So, Taiwan has to pick up the pace in developing a southbound economic policy and cross-strait policy position which are not exclusive or contradictory.  Cross-strait and Southeast Asia operations should not be mutually exclusive but also be cooperative, complementary and foster economic prosperity. 
 
Experts believe that a common goal should be to promote bilateral tariff and trade agreements with ASEAN and India and join regional economic organizations regardless of which political party is in power in Taiwan. From our past experience with Korea, in order to enlarge the economic pie, outward investment cannot be relied on solely, the signing of bilateral and multilateral free trade agreements are needed to gain further access to their domestic markets. 
 
Scholars have pointed out that the New Southbound Policy may be important but tariff and investment barriers still need to be overcome and also question when Taiwan will be able to join the Trans Pacific Partnership (TPP). The Regional Comprehensive Economic Partnership (RCEP) led by China is comprised of 16 economies which make up 56% of Taiwan’s external trade and 57% of its exports. These are Taiwan’s key trading partners. The new government may not ignore the presence of RCEP. Otherwise, it will be very difficult for Taiwan to launch the New Southbound Policy. 
 
The core focus of the New Southbound Policy is people.  Experts has suggested that the government simplify visa procedures for travelers from India and ASEAN countries to attract people from these countries to travel and study in Taiwan to invigorate the Taiwanese economy.  
 
However, visa-free travel is a bilateral and mutually beneficial measure. Taiwan may currently receive visa-free treatment from 164 countries around the world, but it still does not enjoy visa-free travel in Vietnam, the Southeast Asian country in which Taiwan businesses has invested the most money.  This will increase the difficulty of Taiwan extending visa-free travel to Southeast Asian countries. 
 
The success or failure of the New Southbound Policy will not be determined by amazing economic and trade statistics but by demonstrating our boldness and determination. This is because the target of the New Southbound Policy is not Southeast Asia but also self-transformation of the Taiwanese nation and people. 
 
At present, Taiwan urgently needs to be incorporated into the regional community and deepen relations with Southeast and South Asian countries and societies. The key is how to change from the current state of co-existence to a vision of co-prosperity and thereby lead Taiwan from a marginalized island off the coast of Asia towards a brand new world community.
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